By Lorna Tan, Senior Correspondent

The share market is not looking like the wasteland it did a year ago and investors are flocking back, often asking professional financial advisers for a guiding hand on how to manage and build wealth.

Related link: » How to pick a financial adviser

All very sensible but such advice doesn't come free and payment can take different forms, so it's prudent to know about the different fee structures and remuneration models around.

The way some advisers are compensated has been put under the spotlight as well. The regulator has called on insurers and banks to move away from incentive structures that may encourage product- pushing to generate commissions.

It prefers a compensation system that aligns the objectives of the adviser and customer.

The Sunday Times finds out how different financial institutions charge their clients.

Providend

Providend has eight advisers and is a fee-only firm, which means it charges clients for providing advice.

Unlike the case at other companies, any commissions or trailer fees arising from buying products like funds, insurance and bank loans are fully refunded to the clients as rebates.

'The fees we charge are work-based, not product-based. We feel that this is in the best interest of the clients. As we do not take commissions, clients can be assured that efforts are made in finding the best solution for them and not looking for products that pay us the highest commissions,' said Providend chief executive Christopher Tan.

Based on the complexity of work, the amount of time is pre-determined and the fees agreed upon between the firm and the investor.

Clients are charged two types of fees. The initial advisory fee depends on the complexity of the work due to different client segments. It ranges from $300 for a will to an average of $4,000 for a comprehensive plan for affluent customers.

The retainer fee is for investment management. This can range from 0.8 per cent to 1.25 per cent annually, depending on the amount invested and the type of portfolios. This fee can be levied bi-monthly or quarterly.

Clients do not have to pay front-end sales charges for unit trusts.

Providend provides three main client segments, each served by a different team of consultants: the mass affluent segment, defined by a minimum investment amount of $20,000; the top-end affluent ($250,000); and the high net worth ($1 million).

Another factor that differentiates Providend is that its advisers' remuneration is salary-based.

Mr Tan said: 'They have no motivation to 'sell' more products but to do good professional work so as to retain their clients. Consultants are assessed and compensated based on how well they retain their clients.'

ipac financial planning Singapore

When a potential client comes to ipac, the first meeting with an adviser is free.

This initial meeting allows the adviser to learn about the client and his financial goals while also explaining how the firm charges for advice.

ipac's strategic advice fee is typically calculated at $400 per hour for the adviser's time to devise a suitable financial plan. The number of hours will depend on the complexity of this plan.

Clients also pay an annual ongoing advice fee of up to 1 per cent of the investable amount. This is in addition to any underlying fees and charges accompanying any products which they implement.

ipac does not impose a fixed minimum investment sum but its clients tend to have more than $100,000 to invest.

'Our client profile is generally someone who is looking at achieving long-term goals, like looking at retirement or financing the children's education, among other things,' said Mr Greg Campbell, ipac's country manager.

All of its 30 advisers are paid salaries plus bonuses. Remuneration is based on achieving key performance indicators and bonuses are linked to the revenues they achieve and the quality and continuity of the business.

'Our advisers work towards ensuring that our clients achieve their goals, and advisers are appropriately remunerated as they achieve these objectives for our clients,' said Mr Campbell.

IPP Financial Advisers

At IPP, clients are charged an initial advisory fee of up to 3 per cent of the investable amount. There is a separate fee ranging from $500 to $3,000 for writing a comprehensive financial plan. The amount varies with the client's goals, net worth and assets. The adviser may decide to waive this fee should the client decide to implement the plan with IPP.

Once the plan is implemented, there is an annual advisory fee of 1 per cent of the invested amount.

IPP will compare the products of several insurers and pick the best two or three competitive policies as recommendations.

The minimum investment is $25,000 and customers are expected to have regular saving plans.

There are about 450 advisers at IPP and they earn from a cut of the initial and on-going advisory fees, as well as distribution fees from implementing insurance products.

'The annual advisory fee on investments typically encourages long-term customer servicing, resulting in long-term relationships with clients. The annual advisory fee model also promotes the practice of regular review of a client's portfolio and financial standing,' said an IPP spokesman.

Banks

The local banks generally do not charge an advisory fee for managing your funds. In the case of unit trust investments, the fees payable are based on the fees charged by the fund managers. The one-time sales charge is up to 5 per cent and the annual management fees for these unit trusts can be up to 2 per cent.

DBS Bank is currently offering a low sales charge of 1 per cent across all unit trusts on its platform.

Banks like OCBC have taken proactive steps to put in place a revised remuneration framework for sales staff.

Mr Dennis Tan, OCBC's head of branch and premier banking, said that key changes include putting in place additional key performance indicators that would encourage its sales staff to act in the best interests of its customers.

'The revised remuneration package includes both fixed and variable components as well as paying out variable remuneration on a deferred basis,' he said. He declined to provide more details.

Since the start of this year, DBS has taken proactive steps to further strengthen its sales process. These include putting in place an expanded fact-finding process, enhanced risk disclosure, and additional customer-product suitability checks.

'If a product is not suitable for the customer, DBS will inform the customer accordingly and decline to make the sale, even if the customer insists otherwise,' said a DBS spokesman.

This article was first published in The Straits Times.